The false promise of expected shortfall

The false promise of expected shortfall

So much ink has been spilled over the strengths and weaknesses of value-at-risk that it seems pointless to restate them at length here. In brief, my view is that VAR was a major advance over the disjointed framework of non-commensurable limits that preceded its introduction. It addressed the issue of exposure to short-term market fluctuations in a consistent way. What it did not do, and never claimed to do, was say anything about what “lurks beyond the 1% threshold”¹, and the unfortunate fact is